If you are reading this then you probably already know that the used car market in the United States is growing, which is likely the reason why you have an interest in the business, to begin with. We will skip the generic advice regarding licenses and permissions because they are just too obvious, and we are talking about making profits here, rather than the steps to launching a new business.
To put things into a clearer perspective, consider the fact that 40.42 million used cars were sold in the US in 2018, which is a record-breaking number for the industry. The total sales number crossed the 40 million mark for the first time and broke the previous record of 39.2 million (2017) as well. The Y-O-Y increase stands at 3.11% roughly (2017 – 2018), which is more than double the 1.5% increase observed while comparing the total sales count of used cars in 2016 (38.6) to that of 2017 (39.2).
As the used car industry continues to steadily increase in size with each passing year, it is also displaying numbers that are significantly better than new car sales figures. In light of these hardcore stats and facts, there is little doubt that the automotive market is conducive to starting new ventures in the used cars sector. However, just in case you do not have sufficient experience regarding the business or what to expect, the following few tips might just make breaking even a lot easier and faster.
Get to Know Your Cars
It isn’t rare to see people trying to sell cars that they have little to zero idea about. Don’t be that guy and take some time to learn about cars in general and specifically, the type, brand, and models that you will be selling at your place of business.
Just knowing some background information on the Subaru Outback or the Honda Accord you have in stock isn’t exactly enough, although, it’s a start. Take the time necessary to learn about engines, makes, manufacturing techniques and, most importantly, how to maintain your cars all by yourself.
This is not to say that you are supposed to maintain all your inventory by yourself but to know at least the basics of opening up cars and fixing common problems with them is expected from a professional car seller. Check out this page on Irontite Additives that has details regarding the common problems that used car owners often face with engine coolant systems, as well as how to counter each of those problems effectively.
If you really do not know the basics of repairing a car, you have the option to either hire someone who does or learn a few things yourself by joining a short course for basic car maintenance, in addition to following a proper car maintenance blog to stay updated.
Whether you have to get your hands dirty or not, getting into a business where you have no idea regarding the merchandise is a bad idea. Depending completely on someone else makes the employee more powerful than the owner, which is once again, a bad scenario to be in as an entrepreneur.
Of course, you are supposed to employ mechanics, engineers, and used car salesmen/saleswomen with more experience than you, but you should still have the basic ability and credibility to own a used car business and act as its owner.
Provide Limited Dealer’s Warranty
Providing a dealer’s warranty on used cars is a tricky business. You need to get it just right to make sure that you are able to build trust and not suffer a loss because of those warranties. A high-value model in good condition deserves a three – six-month warranty from the dealer and in most situations, it won’t be a problem for you.
The same can’t be said about low-value, ancient vehicles that are not in the best of conditions. In such cases, it is best to provide a sort of extended service rather than a fully-fledged warranty. Just explain to them that your business will take care of the repairs and maintenance to a degree and for a short while. However, never make empty promises and do not use deception to sell old cars because that might backfire on you in the form of a lawsuit, powered by the Lemon Laws.
Marketing and Salesmanship is of the Utmost Importance
This is where handling a used car business differs quite a bit from managing a branded showroom of new cars; marketing and salesmanship is more important than you may realize.
When someone is selling brand new cars, the seller doesn’t need to worry about factors such as marketing, advertising, post-sales service, etc., because the manufacturer is going to do all that for them. Of course, marketing is still essential for each showroom, but to a used car dealer, marketing and salesmanship is everything.
Make sure that you have the following covered and do feel free to add more steps to this list.
- Identify your target audience; it will vary according to the type of car in question
- Launch an elaborate marketing campaign on the internet across social media, blogs, directory sites, and search engines
- Hire a used car salesman with significant and relevant experience
- TV ads and radio ads still work for used cars even today
- Make customer service your highlight and advertise that fact
- Advertise on rental cars, Uber, cabs, auto shops, and even near branded showrooms
- While trying to sell any of the vehicles, advertise the pros, but also mention the cons clearly; it helps to establish yourself as a credible seller
The second-hand car business is just like any other retail business, and the rules of attaining success here are no different either. Good products, proper pricing, excellent customer experience and service, dedicated post-sales service and a good understanding of the financials and legalities are all common elements of running any successful and profitable retail business, which apply towards running a successful used car business as well. Undoubtedly, there is an element of risk when you are selling used items, but as long as you know your cars, it shouldn’t be too much of a problem.
Contributed by: Umer Mahmood